Like many new entrepreneurs, David Sakrison, a Ripon, Wisconsin,
editorial consultant, tried to snag clients with a series of snappy
print ads. His $1,600 expense resulted in a grand total of two
calls. "And one," he reports, "was from a competitor
scoping me out."

Sakrison knew there had to be a better way. The answer was
referrals. "Once I started really pursuing referrals, there
was no sense in advertising," he says. "Using referrals
puts every other way of building a business to shame."

While most successful business owners know that referrals are
important, few employ a consistent system to target, approach and
follow up referrals. Yet many experts agree that a well-planned and
executed referral strategy can bolster business by as much as 80
percent.

Here's a three-step process anyone can use to build
referrals:

1. Target people most likely to give you referrals.
Bob Burg, author of Endless Referrals (see sidebar below),
suggests starting with your "sphere of influence," which
means everyone you know. Make a list of friends, relatives, casual
acquaintances, business associates, suppliers, and professional
service providers, such as doctors, lawyers, accountants, dentists,
teachers-even the person who delivers your mail. If you're
already running a business, the list will naturally include your
customers. Don't forget ex-employees, or people you've met
through religious groups, classes, or alumni associations.

If you've left a company to start your own business, your
best referral source could be your ex-boss or a former colleague.
That's how it was for Sakrison. When he left his job as the
editor of two aviation magazines to start his own business, he
didn't burn his bridges at the publishing company. Instead, his
former boss agreed to spread Sakrison's name to advertisers who
might need help with public relations articles or other business
writing. It was a win/win situation all around: By including
Sakrison's flyer in their mailings, they provided their
customers with the name of a reputable editorial consultant at no
cost; at the same time, Sakrison received a subtle endorsement to a
vast group of potential clients.

Bankers are another good referral source, according to Alyce Ann
Bergkamp, assistant dean of the School of Arts and Sciences at
Catholic University of America and an expert in general business
management. "Bankers tend to know a lot of business
people," says Bergkamp. "If you prove yourself a good
risk for a loan and establish a good relationship with your banker,
your name may well come to mind when he's talking with other
clients who can use your services. And what more believable
referral source could you want working for you than a
banker?"

2. Structure your approach. The success of any referral
strategy will depend on how it's carried out. Start planning by
considering how many referrals you want to pursue each week. Pick a
number, then determine which methods will help you reach your
goal.

The most obvious way to secure referrals is to ask for them, but
as easy as that sounds, many people find it difficult to do. Some
unseasoned entrepreneurs feel a little embarrassed to ask for
referrals, for fear of imposing on their clients. Nonsense, say the
experts! How will anyone know you want referrals if you don't
ask?

According to Mark Lovas, district sales manager for Vector
Marketing in Seattle, "It's fear that holds people back
from asking for referrals-the same fear that holds them back from
calling leads once they get them. But if you believe in your
product, your service and yourself, why is there any
hesitation?" His suggestion: Get into the habit of asking for
referrals. "The more it becomes a part of your business, the
less you will have to think about it." Once you've made a
decision to seek leads, he says, "Just ask, again and
again."

But you need to be careful how you ask-never beg, coerce or
embarrass a source. Carefully word your appeal, indicating that you
get most of your clients by referrals and would really appreciate
their suggestions. Better yet, follow Burg's strategy:
"People need to realize that the best way to get referrals is
to give them." Burg makes it a practice to position himself as
someone on whom others depend for referrals. He asserts, "If
your attitude is How can I help people? rather than How
can people help me?, you will have no trouble cultivating
referrals."

Collecting referrals from your current clients should be a
priority. To ensure that your clients will want to give referrals,
provide top-notch products and service before, during and after the
sale. The most satisfied clients are the ones most likely to offer
referrals.

When asking for referrals face to face, avoid using blanket
statements like, "Who do you know who might benefit from my
service?" Instead, Burg suggests you help clients narrow their
lists. "Be specific," he says. "Lead your client to
good referrals by asking about their associates. For instance, if
your client is a golfer, ask if he plays in a weekly foursome. If
he answers 'yes,' ask if any of his partners could use your
services."

Make it easy for people to refer you. Be sure everyone who might
refer you to others has a supply of your business cards and that
your name, phone number and address appear on every piece of paper
that leaves your store or office. And if you're in a situation
where you'll be asking for referrals, keep a notebook and pen
handy. You don't want your referral source to be searching his
pockets for the tools you should have.

3. Track and follow up. When you receive a referral,
follow up immediately. Your client may have already told the
referral you'd call, so you'll look bad if you don't.
Sakrison has a follow-up method that works like a charm. When
someone offers referrals, Sakrison tells them, "I promise you,
I'll call them." When he calls referrals, Sakrison greets
them with, "I promised so-and-so I'd give you a
call."

Track referrals with a database. Weekly, monthly and annually,
compute the number and types of referrals you've accumulated.
Note who referred each person so you can thank them. Study how many
referrals were converted to clients. These statistics should become
the basis for an annual review of your referral strategy and the
basis for any changes you make.

Always send a thank-you note or letter to referral sources,
whether or not referrals become customers; those who do convert
should generate a more meaningful thank you.

When Joan Kisver, an Aventura, Florida, organizational
consultant, receives a referral who becomes a buyer, she gives the
referring party one free hour of consulting. Others say thanks with
flowers, movie tickets or, best of all, something personally
meaningful to the client. For example, if the referral source is a
horse lover, a box of notecards or a calendar featuring horses
would be appropriate; a gourmet cook might enjoy a regional
cookbook or kitchen gadget.

Plan a quarterly reminder to the referrals and clients in your
database. If you send a newsletter, include a story about referrals
and how much they mean to your business. Include a form and a
self-addressed, stamped envelope to be returned to you with a list
of referrals. Offer a small gift or discount if it's returned.
Don't just ask for names; be specific. Request names and
addresses of the customer's dentist, chiropractor, mechanic,
travel agent or whomever fits your customer profile. Keep the list
to five or fewer names. Be sure to include a space for clients to
sign the card so you can thank them.

Melissa Giovagnoli, author of Make Your Connections
Count! (Dearborn Publishing, $15.95, 800-829-7934), believes
that when you get one good referral from a source, you're
likely to win three to five more if you follow up and say thank you
in a personal way-with a gift or card that shows your appreciation.
"The way you get an endless stream of referrals," she
says, "is to do a good job, keep building relationships, focus
on quality sources, and practice, practice, practice good
networking strategies."

Money Matters

Borrowing Basics

When borrowing money from a bank, it's important to make
sure you look out for your business's best financial and legal
interests. The following three borrower tips are taken from
"Words to the Wary: 10 Rules to Remember When Borrowing Money
From a Bank," a booklet published by Cappello & McCann, a
Santa Barbara, California-based law firm that specializes in the
field of lender liability.

1. Don't rely on what your banker tells you; get it
in writing. A legal doctrine known as the "parol evidence
rule" enables lenders to keep out of court any evidence about
oral agreements they made with their borrowers if that evidence
conflicts in any way with the written loan documents. This means
that if your lender makes you an oral promise that is not reflected
in the written loan documents or if your loan documents don't
match exactly the agreement you've reached with your lender,
then you may not testify about the oral promise or statements that
were made to you.

2. Read every document before you sign it; if you have
any questions, ask. In the past, courts were lenient about
enforcing the strict terms of loan agreements. They understood that
not everyone reads, let alone understands, every single word buried
in the small print.

But those days are over. Courts are now strictly enforcing all
the terms of the loan documents, regardless of how onerous they
are, whether the borrower read them, or even whether or not the
borrower speaks English. Borrowers must remember that virtually
every clause in a loan document is there for one reason: To protect
the lender. That is why it is so important to read and understand
everything in your loan documents.

If your deed of trust says that your bank can foreclose if you
are one day late in payment and that it can do this without
providing you any notice of your default, that is obviously
something you should know. If your loan officer assures you that
the lender never enforces a troublesome provision, then ask that it
be deleted. If your loan officer refuses, be prepared for the
worst.

3. If your banker tells you something that sounds
unusual, check it out. Borrowers must remember that lenders are
selling, just like any other business. When lenders exaggerate or
"puff" about what they can or will do, borrowers must
take that with the same grain of salt that they do when dealing
with any other salesperson.

If your loan officer says he or she can do something for you
that doesn't sound realistic, try to confirm those statements
with the officer's superior. Better yet, don't rely on
those statements until whatever the officer promised actually
occurs.

For a free copy of "Words to the Wary" in its
entirety, send a SASE to A. Barry Cappello, Cappello & McCann,
831 State St., Santa Barbara, CA 93101.-Karin Moeller